Your credit score is one of the most important indicators of financial health. It’s based on information found in your credit report and gives you and lenders an idea of how you’ve managed debt in the past.
If you’re hoping to apply for student loan refinancing, a mortgage, or any other type of credit, it’s crucial that you know where your credit score stands. And if it’s not in good shape, you may want to take steps to improve your score before you apply for credit.
Looking to increase your credit score in a short amount of time? Here’s what you need to know about your credit history and how to increase your credit score fast.
The factors that go into your credit score
There are several different types of credit scores out there, but the most important one is your FICO score. You may be able to get complimentary access to your FICO score from your credit card issuer or bank. If not, you can get a free FICO score through Experian or Discover Credit Scorecard.
The five different factors that go into your FICO credit score include:
- Payment history (35%): Making on-time payments is critical because your payment history is the most important factor in determining your credit score.
- Amounts owed (30%): How much debt you currently owe can impact your ability to take on more debt. More importantly, though, having high credit card balances can damage your credit score considerably.
- Length of credit history (15%): The longer you’ve managed credit, the better it will be for your credit score. Also, your average age of accounts factors into this component, so avoid opening too many new credit accounts.
- Credit mix (10%): Having many different types of credit can help, such as credit cards, student loans, auto loans, and mortgage loans. However, it’s not as important as other factors, so avoid going further into debt just to have a good credit mix.
- New credit (10%): Virtually every time you apply for credit, the lender will run a hard inquiry on your credit report, which can impact your credit score. This is another reason to avoid applying for too many loans and credit cards, especially in a short period.
As you look for ways to increase your credit score fast, understanding these different factors can help you understand where to put your focus.
Ways to improve credit fast and increase your score
Because credit scoring models are incredibly complicated, it’s impossible to say how exactly doing certain things will help or hurt your credit. However, if you’re looking for ways to increase your credit score fast, here’s how to do it.
- Check your credit report: The best way to know which areas you need to address is to check your credit report. You can get a free copy of your report from each of the three national credit bureaus through AnnualCreditReport.com. Start with just one in case you want to check again in the near future, and read through it to find out where to focus your efforts.
- Dispute inaccurate information: If you find incorrect information on your credit report, you can dispute it with the credit bureaus. They’ll investigate the issue, and if they find in your favor, the information will be revised or removed, which could help improve your credit score.
- Get caught up on payments: If you have any past-due payments or collection accounts, get current as quickly as possible. Also, make it a priority to pay your bills on time going forward.
- Pay down your credit card balances: Your credit utilization rate — the percentage of your credit limits that you’re using — is crucial to your credit score. The lower it is, the better.
- Avoid new credit unless necessary: Opening new credit accounts affects your credit inquiries and your length of credit history. Unless you absolutely need it, try to avoid taking on new debt.
- Ask to become an authorized user: One of the best ways to increase your credit score fast is to get added as an authorized user on a family member’s credit card account. Ask a loved one who has a perfect payment history on their credit card to add you, and the entire history of that card will be added to your credit reports, which can boost your score.
If you’re looking for how to improve your credit fast, these are the first steps to take. Depending on which areas of your credit history are weaker and the actions you take, you could start seeing an increase within just a month or two.
The benefits of a higher credit score
Establishing and maintaining a high credit score can take time, but the time and efforts are well worth it. The biggest benefit is an improved chance of getting approved for credit and qualifying for more favorable interest rates and other terms.
That includes student loan refinancing, credit cards, auto loans, mortgage loans, and more. Even if you only manage to score a slightly lower interest rate, it could save you hundreds or even thousands of dollars.
A high credit score can also help you qualify for lower auto and homeowner’s insurance rates and make it easier to get approved for an apartment. Also, some employers may run a credit check before you get hired, so it can help you get a job if that’s the case.
As a result, mastering how to improve credit quickly can make a significant positive impact on your finances and life in many ways.
How to lower student loan rates with better credit
The better your credit score, the higher your chances of getting a low interest rate on student loans and student loan refinancing. If you’re considering refinancing your student loans, take some time to shop around and compare student loan rates and other features.
With Purefy’s Compare Rates tool, you can go through this process with multiple lenders in one place. Because every lender has different criteria for determining interest rates, it’s a good idea to get quotes from several lenders to make sure you get the best deal.
Other ways to qualify for lower interest rates include:
- Getting a co-signer for your loan
- Requesting a shorter repayment term
- Selecting a variable interest rate (keep in mind, though, that this rate can increase over time).
As you take steps to improve your credit and consider these other options, you’ll have a better chance of getting a lower interest rate, which can help you save money as you pay off your student debt.